How Adani managed a coup with NDTV and what next?

Corporatization of Indian media was already happening at a rapid pace. It started 25 years back with Uday Kotak buying out Business Standard but has gathered pace in recent times as media companies struggle for funds. TV18 was taken over by Reliance. Aditya Birla group already holds 41.5% in TV Today group. Adani group first bought Raghav Bahl’s Quintillion Media and now it has bought NDTV. Even globally, media is owned by multi-billion dollar conglomerates like Alphabet, Walt Disney, Comcast, Bertelsmann, Viacom, and News Corp.

But, cut to the present and the talk is all about the 29.18% stake buy in NDTV by the Adani Media venture. Some call it a stealthy buy, but the deal was always waiting to happen. There is an interesting history to the deal. Vishvapradhan Commercial Private Limited (VCPL) had advanced a loan of Rs400 crore to Prannoy Roy and Radhika Roy in 2009. The caveat was that if the loan was not repaid, VCPL could convert the allotted warrants into 100% stake in RRPR Holdings, which would give them 29.18% stake in NDTV.

VCPL recently became a subsidiary of Adani Media and immediately they have exercised the warrants. There is little that NDTV can complain about since they have also not repaid the loan in the last 13 years, or even attempted to do so. With 29.18% stake in NDTV, Adani Media venture becomes the second largest shareholder after Prannoy Roy and Radhika Roy, who jointly own 32.26% in NDTV. As per SEBI regulations, Adani will now make an open offer to buy out another 26% from non-promoter shareholders to acquire a majority stake.

Will the shareholders plump for Adani ownership or prefer the current leadership. If you look at the price rise in anticipation of the deal, the stock is up from Rs156 to Rs408 in just 3 months and the stock is up nearly 60% since the beginning of August. Retail inclination is quite clear. What about institutions. The biggest institutional shareholder in NDTV with 9.75% stake is LTV Investment Fund. But then LTV Fund has 97.7% of its India portfolio invested in Adani group stocks. It is obvious which side they will veer towards.

The only issue is will the shareholders of NDTV find the open offer price attractive. Not quite, since the open offer price is Rs294, which is at a 25% discount to the current market price of Rs408. While the Adani deal was the reason for this surge, it is obvious that the Adani group would be prepared to hike the open offer price proportionately. It looks almost inevitable that Adani Media venture will hardly have too much of a problem crossing the coveted 51% stake mark to attain management control of NDTV.

If you look at the broad trend, the only missing piece in the Adani puzzle was the media business, which is relevant for its clout and influence, more than anything else. Even as media houses are desperate to corporatize in search of a bigger balance sheet, the corporate houses are also looking earnestly at media properties. Adani already owns Quintillion Media of Raghav Bahl and the addition of NDTV allows them to combine TV franchise with a digital franchise. The synergies are just too salivating for Adani group.

At a more practical level, despite the protests of the original founders of NDTV, this deal was waiting to happen. It should be good for the shareholders of NDTV as they would derive better value in a larger set-up. Will that impact the independence of media? That is a separate subject and outside the purview of this discussion. We will leave that for a separate and more intense debate.